Off-Price Apparel Loyalty Programs Aid Retention Amid Competition

by Sean Ogino |

Off-Price Apparel Loyalty Programs Aid Retention Amid Competition

off-price apparel loyalty

A buyer’s urge to have an item at the lowest possible price is as old as civilization. That’s why outlet-rich Las Vegas and many other cities in the USA are seeing people thronging at the off-price retail outlets. As saving has been valued equally by many, we are seeing a higher percentage of affluent consumers in that crowd. According to NPD Group Inc., a global information company, discount buyers are hardcore apparel purchasers and account for 75% of apparel purchases across all retail channels. It also found that off-price is second only to online in terms of growth rate. Shopping visits made to off-price retail stores- whether a consumer made a purchase or not- increased 4% in the year ending April 2016 compared with the same period the previous year.

It’s crystal clear that people want better deals and they know that they will find such deals in off-price outlets- not in department stores. Nordstrom’s last year’s move of opening up around 13 of its off-price Nordstrom Rack stores–compared to opening just one full-line Nordstrom store–must be viewed in this light. But how can sellers guarantee retention other than by offering the lowest prices or best selection? An off-price apparel loyalty program can remedy the situation.

Off-Price Apparel Loyalty Programs Capitalize on the Love of Markdowns

Remember that buyers of off-price apparel are price sensitive and they are heavily driven by the amount of money they save on each purchase. The other thing that catches their attention is a special offer. Loyalty programs let businesses–and shoppers–easily customize their offerings. This customization can be realized by rewarding frequent buyers or loyal customers by allowing them to have their next purchase at discounted rates or by giving them access to special offers.

Moreover, one study has also concluded that discounts are the most important features of any loyalty program. But as these are extremely price sensitive buyers, a value proposition needs to be a slightly different than the normal loyalty program. Customers should know how much extra discount they will get based on how much they spend. They would spend more or shop the same brand more regularly.

Also, the appeal of a markdown is a strong element in off-price apparel loyalty programs, as it gives a strong motive to the buyer to stay with the business. So much so that in many cases it has challenged the old wisdom of a loyalty program that it is only for heavy buyers. This study has found that the biggest increase in spending and purchase frequency among the program members was among light buyers. This is attributed to loyalty programs‘ ability to eliminate cherry-picking and to encourage cross-selling. Understandably, off-price apparel loyalty programs give a considerable stimulus in this sense.

Loyalty Programs Give Detailed Customer Insights

Every loyalty platform is a rich bank of valuable customer data. Over time, a company can reach the level where it can create a profile of each and every customer’s buying habits: what he buys and when, how full his basket is, how much he spends and how he pays. Companies can truly know their customers. Naturally, they can create entire marketing communication that revolves around their preferences, choices, habits and interests.

When your loyalty program offers enhanced data analysis and segmenting options, it’s even easier to upsell and cross-sell customers. An RFM dashboard–whose initials stand for the variables of recency, frequency, and monetary value–should be able to plug into your loyalty program to let you segment by variables inclulding:

  • RFM
  • Customer loyalty and advocate marketing data
  • Location of purchase or delivery
  • Type of product purchased
  • Interactions with the brand in-store, online, in-app, or on social
  • Any data imported from a client’s CRM, ERP, ESP, or personalization engine, among other third-party data sources

While off-price sellers are experiencing a boom right now, there is a limit to giving discounts, as they weigh on margins. Too much revenue may get skewed toward highly discounted items which will eventually have a negative impact on profits. The only way out is getting more and more purchases and repurchases. And considering the fact that a marketing industry survey found that 55% of people say that when choosing between two similar companies they will usually pick one with a loyalty program, an off-price apparel loyalty program.

The Virtual Changing Room: A New Need for Apparel Sellers?

virtual changing room

Buying clothes online has always been a leap in the dark. For most shoppers, it’s frustrating to see that the garment that dazzled them so much on the retailer’s website is too big or small, or just doesn’t look right. Return rates are as high as 30% to 40%, and 70% of returns happen due to wrong size. Apart from dissatisfied customers, it has a negative collateral impact on the financial health of the retailer. The loss gets compounded, as most of the retailers nowadays offer free shipping due to the sheer force of brute competition. That’s why retailers as well as etailers have believed that matters related to fit are way too important and can impact sales directly. They have tried hard to cut short the danger of returns through various ways. One such way, which is in accordance with the technology empowered era, is the virtual changing room. And it is quickly blurring the lines between online and physical fashion retail.

Certainly, many retailers have used this concept of the virtual changing room in various ways. In physical stores, virtual clothing can be superimposed onto the shopper’s image in a mirror-like screen. In this way, the virtual changing room eliminates the need to get undressed. For busy shoppers, this can be a much more enjoyable experience as they can try on more items in less time.

Similarly, Zugara, a virtual changing room technology company, offers Webcam Social Shopper software, which enables a shopper to use their webcam as “a magic mirror” to try on items virtually. Just like the in-store experience, a shopper can hold a dress in front of her. The mirror will immediately notify her about the rightness of the color and style of the dress as per her body style, skin tone and features. The interface is intuitively interactive with the built in gestures, motion and voice control. The software even allows her to take pictures and share with her friends.

virtual changing room

Looking at the sway of the mobile in online shopping, integrating virtual changing room tech in mobile infrastructure appears like the next step. Gap has just rolled out a new AR equipped Dressing Room app. Within the app–which was created by Google and Avametric–a shopper has to provide basic information like height and weight into the app. Once they select one of five body types, a virtual 3D model will appear by displaying how the garment will look on the shopper. If a shopper is satisfied, he can buy the item from the app.

Virtual Changing Rooms

Benefits of Virtual Changing Rooms

It’s clear that virtual changing room technology will benefit both etailers and retailers. The first direct and visible benefit is the novelty of such apps and rooms. Though they have been in use for some time, they are still not the norm. Their newness will not wear off that quickly. Obviously, they will be a key factor in attracting more shoppers. A 2015 report by Walker Sands confirms this claim, as it found that 35% of customers would shop more online if they were able to try items on virtually, rather than just see images of them.

But, these virtual trials will also pleasantly affect the inventory scenario of brick and mortar retailers. There is no need for them to carry clothes in all sizes, colors and patterns. The customers can simply “try on” the demo (virtually of course), customize their pick (say, Medium in Light Blue with contrasting trim) and place their order. The cost that requires to maintain the inventory in the form of storehouses and staff can be waived off (think of how Bonobos keeps costs low by stocking next to nothing in their stores). Thus, when looked at it from the long term view, it’s worth to bear the cost that is required for implementation and installation for virtual changing room tech. This cost analysis particularly holds true for in-store virtual dressing rooms.

The theoretical benefits of both the online and in-store virtual dressing rooms have already been transformed into real revenue for many retailers. Carrefour introduced the app that shared similarity with the Gap’s app as far as functionality is concerned. It saw its returns fall by over 30% whilst conversion rates were up by more than 23%.

But by no means has virtual changing room tech managed to keep the critics and cynics silent. They are more skeptical about the efficacy of online virtual dressing rooms. Marge Laney, CEO of Alert Tech, has no problem in welcoming it. But she has raised her concerns by saying, “No buying decision is final until the try-on has been completed, whether that’s in the fitting room or at home. AR can increase the fidelity of the online experience, but will never replace the actual try-on when the items are received.” That said, virtual reality and augmented reality aren’t the stuff of science fiction. The advancement may iron out the points which are making people like Marge Laney to look at such apps with a bit apprehension!

While virtual changing room technology is in its nascent form, it’s well-established that online sellers need engaging visual content to convert shoppers. Visual Commerce–including shoppable Instagram through Shoppic,me, shoppable multimedia user generated content displays, and more–is an excellent way of using this technology. Fill out the form below to learn more!

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